Connoisseur Developments Limited & Ors v Antonakis Koumis

A commercial joint venture agreement must be construed objectively, giving primary weight to its language read in its contractual and commercial context. An express good-faith clause takes its meaning from the agreement and context; courts should not import formulaic minimum standards into every such clause. Fiduciary duties are unusual between commercial co-venturers and require particular features showing reliance on another to act exclusively for the claimant’s benefit.

Where a development agreement gives the developer sole control over management and matters of principle, that power may permit changes within the commercial scope of the agreed development, subject to good faith. A payment for property ordinarily denotes payment for its acquisition rather than merely its use. Simple loan extensions required to preserve the agreed financing may fall within contractual good-faith obligations, whereas the clause does not necessarily require entry into materially different refinancing arrangements.

The claimants, a development company and two directors, sued the defendant, who acted personally and as executor of his father’s estate. The dispute concerned a 2006 joint venture agreement for developing property into flats. The claimants sought damages for alleged breaches concerning changes to the development, delayed sales, rent payments, refinancing, loan renewals and execution of a planning agreement. The defendant counterclaimed for rent, interest and restoration of the freehold.

The court determined the construction of the agreement, the scope of its good-faith obligations, whether fiduciary duties arose, the treatment of rents paid to the deceased, and whether failures to sign refinancing, loan and planning documents caused actionable loss.

1. Construction and development. The court applied the objective principles of contractual construction. Clauses 4.1 and 4.2 gave the company sole control over management and matters of principle, including changes to the design and development. Building 11 rather than 9 flats was within the permitted commercial scope of the JVA. The claimants acted in good faith and no contractual or fiduciary breach arose from that change.
2. Good faith. The express clause had to be construed in its contractual context. The court rejected the importation of universal formulaic minimum standards. It did not require the parents to enter materially different long-term refinancing arrangements, but it did require them to sign loan renewals which simply extended the existing facility.
3. Fiduciary duties. A contractual commercial joint venture does not ordinarily create fiduciary duties. The necessary question is whether one party depended on another to exercise powers exclusively for that party’s benefit. The JVA’s express good-faith clause and allocation of commercial control meant that no additional fiduciary duties were owed in the respects relied upon.
4. Freehold. The JVA required the parents to transfer the freehold. The £800,000 payment was consideration for the Property, not merely for its use. The claim based on the transfer therefore failed.
5. Rents. The parties agreed that the deceased would grant short tenancies and receive rents, but did not agree expressly how those payments would be accounted for. They were to be credited or set off against the £800,000. Stopping the payments was a breach, and the estate had a claim for unpaid instalments, subject to the resulting overpayment calculation.
6. Other claims. The claim concerning refusal to grant long leases for refinancing failed for want of proof of refusal, causation and loss. The claim concerning failure to sign loan-renewal documents succeeded. The refusal to sign the s106 agreement was also a breach. Quantum and consequential issues, including the precise overpayment and losses, were adjourned for further determination.